What is a pay as you go account

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An early pay-as-you-go prototype
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A pay as you go account helps you save money by eliminating over-spending

When youíre trying to keep a close eye on every dollar, receiving a stack of bills at the end of the month is disheartening. A pay as you go account allows you to pay for certain utilities as you use them, controlling your usage and your budget at the same time.

Understanding how it works can help you determine if one may be right for you.

Many phone and electric companies allow pay as you go billing. The mobile companies that offer it allow you to switch to a monthly plan at any time so thereís no risk of locking yourself into a contract. Utility companies typically require more notice so check with your service provider before signing up.

How it works

When you set up this type of account with an electricity provider, you purchase an amount of electricity before you use it. This helps you reduce power noticeably. Rather than receiving a monthly statement and bill, your usage is calculated daily and you can track it either online or by phone.

If youíre trying to live a greener lifestyle, this is an effective way to monitor usage and finally change wasteful habits, like leaving lights on. You may already know that unplugging appliances and gadgets reduces your power bill, but having the ability to compare one day's usage to the next allows you to see the actual amount of energy saved.

The positive effects of saving energy add up. They motivate you to further green your home and habits, and even encourage others to do so. Itís tempting to crank up the AC on a hot day, but watching your usage sky rocket may be the push you need to drink a cold glass of water and turn on the fan instead.

With a mobile company, a pay as you go account allows you to pay for minutes and data as you need them. This is a smart choice for people who donít use many minutes or data to begin with. Why pay for more than you use with a plan when you can save money by paying only for what you use?

The account will be fine if you don't check your balance every day as service providers typically send an alert by email or text message when your account is running low. If your account does run empty, youíll lose service immediately. In this case all you need to do is buy more minutes or power and service is restored within under an hour, usually a half hour. Note that with most companies youíre not charged a disconnection or reconnection fee if this happens.

Some mobile companies set a limit on the amount of money you can have in your account at a time, but this amount is fairly high. Other companies have no significant minimum so if you want to buy only enough power to get you to your next pay check you can.

When selecting this type of plan, always find out what features the provider offers. For instance, some mobile providers charge a fee for voicemail, others have higher rates for international calling. Know how much money the providers charge per minute, per text and whether or not money in your account rolls over to the next month. Most accounts roll over, but some come with an expiration date.

Other services that offer a pay as you go account

  • Royalty-free stock image companies like allow you to purchase images as you need them rather than paying for a full monthly subscription. 
  • Some Internet service providers offer this, depending on where you live. 
  • Roadside services, like those provided by Allstate allow you to pay only as you need the services.  

Whether youíre trying to save money, power or both, this structure allows many people to afford the services they need. If youíve ever wondered where all the money goes at the end of the money, try one of these account to better monitor and control your householdís usage.

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